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Unprecedented
Badly worded by me in last post as I meant to say the Puretech investment case rests firmly on Karuna AND the other factors which I mentioned in the following paragraphs notably Vedanta and the new Founded Entities, Seaport and Gallop and Puretech's in-house drug therapies notably LYT-100 ( which Puretech think could a blockbuster) and the Puretech cash holding of $320m.
The issue of how best to return cash to shareholders is a tricky matter and I suspect Invesco will have a say in the matter.
The share buyback option I agree can be laborious so a mix of special dividend and a share buyback may be the answer.
I am not interested in shareholders getting shares in founded companies IPOs as this is far down the road and why invest more in these derisked companies when Puretech will still have a sizeable shareholding.
Also, other than somewhat small additional investment, I don't see the logic in Puretech investing large amounts of cash in derisked founded entities such as Seaport and Gallop as the very reason for setting them up was to derisk the costly financing of the research and development of certain drugs,
free up cash resources for own in-house drug development and return cash to shareholders .
Remember Karuna was blow out winner and maybe Vedanta may be as well but the other founded businesses have underperformed badly.
So we await to see what Zohar has in mind regarding returning cash to shareholders as she was in a bit of bother with large shareholders a few months ago when the share price hit a 5 year low of 145p or so.
ATB
TakeAim
Regarding NAVs , Puretech's investments in its small listed founded entities, Akili, Vor and Gelesis are not material in the overall analysis with a value of just $10 to $15m exclusive of potential royalties.
Gelesis who received FDA approval for Plenity ,its weight loss product has been totally wiped out by the new drugs such as Ozempic and Puretech has abandoned its interest in taking it over.
It's smaller founded entities Sonde and Entrega have potential.
However the Puretech investment case rests firmly on its c$ 1 billion potential receipts from Karuna following the Bristol Myers Squibb takeover ie $325m for its direct shareholding plus $400m from Royalty Pharma for Karuna revenues up to $2b and 2% royalties on revenues above $2b plus c$10m on FDA approval.
The newly incorporated founded entities Seaport and Gallop release major research and development funding from Puretech's cash resources and are involved in exciting new cancer and neuroscience therapies.
Vedanta is possibly the next Karuna and this year's drug trials and maybe an IPO could be transformational .
Then we have Puretech's own in-house drugs particularly LYT-100 reaching end stage trials added to Puretech's current cash pile of C$320m.
I agree a major catalyst for shareholders will be the announcement of a major special dividend and or share buybacks.
Even though Puretech is putting its current share buyback into Treasury, I would rather see this continue at a greater level rather than a dividend at this depressed share price level as it suggests Management is not able to use its surplus cash more wisely.
If Zohar is convinced of the potential of Puretech and recognises the stark underlying mispricing of the shares then what better investment can she make other than buying Puretech shares.
ATB
The Vedanta $1b valuation is higher than the DealRoom.com valuation of c$550-680m in April 2023 after the financing round completed in that month.
The increase is due to major progress in Vedantas drug pipeline with 4 drugs now in late stage clinical trials ( one in Phase3 and three in Phase2 ) and the improvement in the market for Pharma investment particularly in the US...Note Bristol Myers acquisition of Karuna for $14 billion as an example.
TakeAim
Please see my posts of the 27th and 30th December for answers to your questions with a correction to the reference of Puretech's holding in Vedanta being now 41% not 47% as stated.
Also Puretech has confirmed in its December corporate update ( which you should read in detail)
that it is examining a return of surplus cash to investors by way of a special dividend and or further share buybacks.
Vedanta has raised c $400 m in financing to date from Pfizer, Bristol Myers, Gates Foundation and other large investors and has a valuation of c1billion per Wall Street analysts with an IPO muted for this year or next year.
The macro outlook for Pharma companies has dramatically improved in recent months with large Acquisitions, AI related advances in accelerating research and fast tracking of drug development and the ageing of Western and Chinese populations et al.
We are now becoming aware of the stark undervaluation of Puretech's shares and this anomaly is illustrated further by Puretech's investment in Vedanta Biosciences where it has a 47% shareholding and significant royalties potential.
Vedanta is valued at c$1billion with 4 major drugs at late stage development including one in Phase 3 trial and two in Phase 2 trials.
Vedanta has built state of the art manufacturing facilities near Boston and has raised c$400m in funding from major investors such as Invesco, Bristol Myers, Pfizer, the Gates Foundation.
Analysts are suggesting a potential market valuation of c$3-5billion on successful drug trials and an IPO is being muted for 2024.
So with Puretech's investment plus royalties in Karuna valued at c$1billion plus a potential return of over $1billion in Vedanta plus say $200 m in other founded entities we are up to over $2billion.
Then add Puretech's in house drug programmes including its late stage possible blockbuster Pulmonary Fibrosis( LYT-100) drug plus cash of c$320m and you have an economic value of c$3/4billion or over £10 a share.
Dyphne Zohar say she wanted to create a $10 billion Pharma company way back in 2021 .
She better be careful she is not usurped with an aggressive takeover approach at this crazy market cap.
Happy New Year.
Mickymix
The main shareholder in Puretech is the massive Invesco Fund Management Group with c23% of the total shares.
Invesco has reduced its shareholding from 34% in the past 3 years due to internal rules relating to Invesco holding major controlling stakes in companies.
The Invesco shareholding is now below the critical 25% level and they appear happy now but still have a huge influence.
I have been in contact with the company about the bizarre market mispricing of Puretech shares given the Economic Value ( EV) is approaching $2billion plus.
Puretech's investment in Karuna alone is potentially above $1billion as follows..$336m from 2.4% shareholding plus $400m from Royalty Pharma on Karuna revenues up to $2billion plus milestone payments of c$10 million on FDA approval plus 2% royalties on revenues above $2billion ( analysts estimate Karuna revenues to hit c$7billion for its Schizophrenia and Dementia drugs giving another possible $100 million annual royalties to Puretech .
Add in Puretech's 47% Investment in Vedanta which is unlisted but based on recent financing rounds from Investors including Pfizer and the Gates Foundation is valued at over $ 1billion.
Not to mention the 2 new Founded companies plus existing Founded companies with a conservative combined valuation of say $200m.
Finally we have Puretech's owned retained in house drugs described as the jewels in crown and potentially blockbusters by Puretech Management.
Oh I nearly forgot Puretech has cash of $330m.
Madness and I told Management that the company is very vulnerable to a takeover at this crazy share price and Market Cap of £500m.
Lastly some brokers like Bell have an SP target of over £9.
I rest my case.
ATB
I have looked again at the Bristol Meyers deal with Karuna and its implications for Puretech.
The benefits to Puretech are far beyond the headline news namely proceeds from shareholding of 2.4% in Karuna of $336m plus Royalty Pharma of c$400m plus $8M on FDA approval ( now certain) plus 2% of all royalties above $ 2billion sales where analysts are forecasting revenues for Bristol Meyers /Karuna of over $4billion giving Puretech additional annual royalty receipts of c$40 m per annum .
Rumours suggest Bristol Meyers will do a deal to clean up the royalties issue with Royalty Pharma and Puretech with a once off payment.
Also not unsurprisingly other rumours on Wall Street are saying a bid for Puretech is now a possibility given the accelerating consolidation in the Pharma sector which is coming back to life in a big way.
Great days ahead
Happy Christmas
Pokerchips
As I have mentioned before , I have an large investment in Puretech where one of its founded companies , Karuna , was today taken over by Bristol Meyers for $14 billion after Karuna's Schizophrenia drug KarXT was successful in a Phase 3 trial .
The market for Lupus is bigger than that for Schizophrenia and other mental health diseases but demonstrates the huge potential for Lupuzor not to mention CIPD.
I think with the appointment of Dr Laurence O'Reilly and the commencement of the Lupuzor and CIPD trials allied with a rest of the world deal for Lupuzor and a partner for CIPD, Immupharma could prove to be a very tasty proposition for large Pharma at a ridiculous market cap of just £6m.
With the imminent trials a valuation of c£50m or so would not be extreme imho.
DYOR
****nal
if you read the update of 2 days ago you will see that $32m of karuna shares were sold by puretech since the 12 october via on market transactions leaving puretech with 2.4% as at the 19 december 2023.
i trust that clarifies matters.
Always
The fact that Bristol Meyers is paying $14billion means the FDA approval for Karuna's KarXT Schizophrenia drug is considered a formality and thus the receipt of up to $400m in royalties plus milestone payments on approval and incoming sharing with Bristol Meyers is now almost assured.
Don't forget Puretech has current cash balances of its own of C$340m.
Watch Puretech share price on Nasdaq this afternoon .
Always
Reas update issued 2 days ago.
Major special dividend and / or share buyouts to be announced within weeks.
I have suggested to Kana in Investor Relations that the remaining Puretech 2.4% shareholding in Karuna valued at $200m be sold and used to fund the return of a similar amount to shareholders.
This message was passed on to the Executive management who I feel are already beginning this process.
The remaining Karuna Royalty payments of up to $400m payable to Puretech from Royalty Pharma plus
further milestone and income sharing receipts are enough risk/ benefit to carry in Karuna and hence the smart move is divest the shareholding in Karuna whose market cap of $8b is in my view is fully valued.
ATB
Flash
You are suggesting that the SP could drop by 50% .
So Immupharma will have a market cap of £3 m even though it will have 2 drug therapies in Phase 3 trials .
Any big Pharma would pay £10/20 m to be involved in such late stage blockbuster drug trials and with Alora group paying $25m to conduct the Lupuzor trial are you serious about this crash in Immupharma SP?.
By the way the future funding options for Immupharma have been transformed by the announcement and could entail the issue of a Convertible Bond with equity exercise rights at a much higher SP than 1.6p.
Many players including Alora would be interested in this deal.
So perhaps you are unduly panicking just as the scenario looks decidedly rosier.
ATB
Cauldstream
I can understand some shareholders want to see detailed trial timelines and dates but for a small company like Immupharma albeit supported by the Alora group , organising a major Phase 3 trial for an extremely complex autoimmune disease like Lupus is no easy matter .
This trial is pivotal for Alora as well as Immupharma and much is at stake so it is vitally important they get it right.
Obviously Flash wants out and his selling will depress the share price particularly in these dog days leading up the Christmas.
Hopefully the new year will usher in brighter times for the long suffering faithful here in Immupharma.
ATB